Taking a look at unemployment debit cards

Not long ago, the State of Maine joined dozens of other states in changing the way it gave out unemployment benefits. Instead of checks, the state now gives recipients a choice: They can have their benefits deposited directly to their account, or they can receive prepaid debit cards.

The debit card approach eliminates the cost of issuing paper checks. That can be important for people who do not have bank accounts and so cannot use direct deposit (see Consumer Forum, Dec. 27, 2010). A debit card also is generally less costly to use than a check-cashing service. The card also means recipients are less likely to carry large amounts of cash with them.

A report released this month by the National Consumer Law Center (NCLC) surveys the use of prepaid debit cards for unemployment compensation. A total of 40 states, including Maine, use the cards. The survey shows that card issuers may have very different policies for the various states in which they operate.

When direct deposit is not the recipient’s choice, Maine’s unemployment compensation is made on debit cards issued by JP Morgan Chase. The state’s website explaining the procedure (www.maine.gov/labor/unemployment/mapcard) says fees of 50 to 75 cents may be charged to transfer money from the card to a bank account. That’s a new service Chase does not offer in all states, and it is not mentioned in the fee schedule.

Maine is among the states in which card users must pay a fee every time they use a personal identification number (PIN) when buying something. The fee is between ten and 25 cents per purchase. There’s no fee if the user signs for the purchase instead of using a PIN.

Card holders get one cash withdrawal per deposit free at any Chase, Key Bank or Allpoint ATM; each withdrawal after that incurs a fee of $1.50. There’s a $1.50 fee for a cash withdrawal at other banks’ ATMs in the U.S., $3 outside the U.S.

Chase charges a few other fees for various services. Free account statements are available online, but a printed, mailed statement costs 75 cents a month. The state’s website also notes that an inactivity fee may be charged if the account is inactive for more than 180 days; however, the amount of the fee is not specified.

The state’s website has a list of tips to avoid paying fees. The most important is always to be aware of your balance, so you won’t be hit with an ATM denial fee ($1). Users should also be aware that they can’t add money to the account; only the state can do that.

The NCLC report lists states with higher fee structures than Maine. It also points out that the millions of unemployed people in the U.S. are among those least able to absorb such fees.

“States need to do more to make sure that unemployed workers get every penny to which they are entitled,” the report says.

Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s membership-funded, nonprofit consumer organization. Individual and business memberships are available at modest rates. For assistance with consumer-related issues, including consumer fraud and identity theft, or for more information, write: Consumer Forum, P.O. Box 486, Brewer 04412, go to http://necontact.wordpress.com, or emai lcontacexdir@live.com.